Defence Force advised to leave expensive Future Submarine Project in France

Australia’s $80 billion submarine project has hit another snag, with the program so costly Defence has been advised to walk away.

Australia’s future submarines program has hit a nine-month delay, an audit of the $80 billion program has found.

Two key contract milestones have also been extended.

“As a result, Defence cannot demonstrate that its expenditure of $396 million on design of the future submarine has been fully effective,” the Australian National Audit Office said.

The design and construction of the submarines is the largest Defence procurement in Australia’s history.

A submarine in the Naval Group shipyard in Cherbourg, France. Named “Suffren”, this submarine was also delayed three years. Picture: Ludovic Marin/AFP

Defence is in the process of acquiring 12 new submarines to replace six Collins Class vessels.

The audit office found its decision not to acquire “off the shelf” military submarines has increased the risk of the acquisition.

The submarines are being designed and constructed by France’s Naval Group at the Osborne Shipyard in South Australia.

However, the report revealed Defence has approved the fabrication of hull parts for the first submarine to be built completely in France, in an effort to avoid delays.

US Defence contractor Lockheed Martin is the combat system integrator. The Australian arm of the American defence giant defeated US rival Raytheon in a deal to fit out the vessels.

The auditor-general found the success of the program is dependent on Defence establishing an effective long-term partnership with Naval Group.

“This key relationship is at a relatively early stage and the parties’ active management of both specific issues and the partnership is essential for effective risk management and program success,” he said.

Former PM Malcolm Turnbull at the Naval Group submarine boat yard in Cherbourg, France. Picture: Kym Smith

In another sign of tension between Australia’s Defence Force and the French shipbuilding company, the report also revealed a comment made in September 2018 by the government’s Naval Shipbuilding Advisory Board.

“Defence should assess whether program risks outweighed the benefits of proceeding,” the board advised.

The differences in Australian and French engineering methodologies has also been cited as what could be a major issue.

The new submarines are expected to enter service by the mid-2030s with the first to be delivered to the Australian Navy by 2035.

Defence Minister Linda Reynolds told The Australianeverything was on track and the delay was important in making sure the submarines were designed right.

“Doing so will reduce costly changes and uncertainties while the Attack-class submarines are built, and will reduce the need for larger construction contingencies,” she said.

Opposition Defence spokesman Richard Marles was not as forgiving, warning the government’s “mishandling” of the project presented major risks.

“On all three measures of this program — on time of delivery, on the cost of the project, and on the amount of the Australian content — the numbers are all going the wrong way,” he told The Australian.

Centre Alliance senator Rex Patrick said: “The alarm bells are ringing”.

— With AFP